Earned Value Management (EVM) is a project management technique for measuring project performance and progress in an objective manner. It integrates project scope, time, and cost data to provide accurate forecasts of project performance problems. EVM is a critical tool for project managers to understand project health and make informed decisions.

1. Planned Value (PV): The authorized budget assigned to scheduled work. It represents the value of the work planned to be completed by a certain date.
2. Earned Value (EV): The value of work actually performed by a certain date. It is calculated as the percentage of completed work multiplied by the project budget.
3. Actual Cost (AC): The actual cost incurred for the work completed by a certain date.

1. Cost Variance (CV): Indicates whether the project is under or over budget. \[ CV = EV - AC \]

   • Positive CV: Under budget
   • Negative CV: Over budget

2. Schedule Variance (SV): Indicates whether the project is ahead or behind schedule. \[ SV = EV - PV \]

   • Positive SV: Ahead of schedule
   • Negative SV: Behind schedule

3. Cost Performance Index (CPI): Measures the cost efficiency of budgeted resources. \[ CPI = \frac{EV}{AC} \]

   • CPI > 1: Cost efficiency is good
   • CPI < 1: Cost efficiency is poor

4. Schedule Performance Index (SPI): Measures the efficiency of time utilization. \[ SPI = \frac{EV}{PV} \]

   • SPI > 1: Ahead of schedule
   • SPI < 1: Behind schedule

5. Estimate at Completion (EAC): Forecasts the total cost of the project at completion. \[ EAC = BAC / CPI \] Where BAC is the Budget at Completion.

6. Estimate to Complete (ETC): Forecasts the cost to complete the remaining work. \[ ETC = EAC - AC \]

7. Variance at Completion (VAC): Indicates the expected budget surplus or deficit. \[ VAC = BAC - EAC \]

Consider a project with the following data:

• Budget at Completion (BAC): $100,000
• Planned Value (PV): $50,000
• Earned Value (EV): $45,000
• Actual Cost (AC): $40,000

Let's calculate the key EVM metrics:

1. Cost Variance (CV) \[ CV = EV - AC = 45,000 - 40,000 = 5,000 \]

   • The project is under budget by $5,000.

2. Schedule Variance (SV) \[ SV = EV - PV = 45,000 - 50,000 = -5,000 \]

   • The project is behind schedule by $5,000.

3. Cost Performance Index (CPI) \[ CPI = \frac{EV}{AC} = \frac{45,000}{40,000} = 1.125 \]

   • The project is cost-efficient.

4. Schedule Performance Index (SPI) \[ SPI = \frac{EV}{PV} = \frac{45,000}{50,000} = 0.9 \]

   • The project is behind schedule.

5. Estimate at Completion (EAC) \[ EAC = \frac{BAC}{CPI} = \frac{100,000}{1.125} = 88,889 \]

   • The total cost at completion is forecasted to be $88,889.

6. Estimate to Complete (ETC) \[ ETC = EAC - AC = 88,889 - 40,000 = 48,889 \]

   • The cost to complete the remaining work is $48,889.

7. Variance at Completion (VAC) \[ VAC = BAC - EAC = 100,000 - 88,889 = 11,111 \]

   • The project is expected to be under budget by $11,111.

Exercise 1: Calculate EVM Metrics

Given the following project data:

• Budget at Completion (BAC): $200,000
• Planned Value (PV): $120,000
• Earned Value (EV): $110,000
• Actual Cost (AC): $100,000

Calculate the following:

1. Cost Variance (CV)
2. Schedule Variance (SV)
3. Cost Performance Index (CPI)
4. Schedule Performance Index (SPI)
5. Estimate at Completion (EAC)
6. Estimate to Complete (ETC)
7. Variance at Completion (VAC)

Solution:

1. Cost Variance (CV) \[ CV = EV - AC = 110,000 - 100,000 = 10,000 \]

2. Schedule Variance (SV) \[ SV = EV - PV = 110,000 - 120,000 = -10,000 \]

3. Cost Performance Index (CPI) \[ CPI = \frac{EV}{AC} = \frac{110,000}{100,000} = 1.1 \]

4. Schedule Performance Index (SPI) \[ SPI = \frac{EV}{PV} = \frac{110,000}{120,000} = 0.917 \]

5. Estimate at Completion (EAC) \[ EAC = \frac{BAC}{CPI} = \frac{200,000}{1.1} = 181,818 \]

6. Estimate to Complete (ETC) \[ ETC = EAC - AC = 181,818 - 100,000 = 81,818 \]

7. Variance at Completion (VAC) \[ VAC = BAC - EAC = 200,000 - 181,818 = 18,182 \]

• Mistake: Confusing PV, EV, and AC. Tip: Remember PV is planned, EV is earned, and AC is actual cost.

• Mistake: Misinterpreting positive and negative variances. Tip: Positive CV and SV are good; negative CV and SV indicate issues.

• Mistake: Incorrectly calculating indices. Tip: Double-check formulas and ensure correct values are used.

Earned Value Management is a powerful tool for project managers to assess project performance and predict future performance. By understanding and applying EVM metrics, project managers can make informed decisions to keep projects on track and within budget.